Basic Accounting Quiz

Mune Company recorded journal entries for withdrawal of P50,000, the P32,000 increase in accounts receivable for services rendered, and the purchase of equipment for P21,000. What net effect do these entries have on equity?

An accounting record where a company initially records transactions and selected other events is called the

• ledger

• account

• trial balance

• journal

The residual interest in a corporation belongs to the

• Management

• Creditors

• Ordinary shareholders

• Preference shareholders

Reversing entries do not apply to which of the following items?

• Unearned revenue

• Accrued wages

• Prepaid insurance

• Depreciation

Eaton Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenues. This account had a balance of P1,800,000 at December 31, 2018 before year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense account, which had a balance of P450,000 at December 31, 2018. Service contracts still outstanding at December 31, 2018 expire as follows: During 2019 P380,000 During 2020 570,000 During 2021 350,000 What amount should be reported as Unearned Service Revenues in Eaton's December 31, 2018 statement of financial position?

• P1,350,000

• P1,300,000

• P850,000

• P500,000

The worksheet for Sharko Co. consisted of five pairs of debit and credit columns. The peso amount of one item appeared in both the credit column of the income statement section and the debit column of the balance sheet section. That item is

• net income for the period

• beginning inventory

• cost of goods sold

• Net loss for the period

Chen Company's account balances at December 31, 2018 for Accounts Receivable and the Allowance for Doubtful Accounts are P320,000 debit and P600 credit. Sales during 2018 were P900,000. It is estimated that 1% of sales will be uncollectible. The adjusting entry would include a credit to the allowance account for

• P9,600

• P9,000

• P8,400

• P3,200

Which of the following statements regarding reversing entries is INCORRECT?

• Deferrals are generally entered in statement of financial position accounts, thus making reversing entries unnecessary

• All accruals should be reversed

• Adjusting entries for depreciation and bad debts are never reversed

• Reversing entries change amounts reported in the statement of financial position for the previous period

Under International Financial Reporting Standards (IFRS)

• The cash-basis method of accounting is accepted

• Events are recorded in the period in which the event occurs

• Net income will be lower under the cash-basis than accural-basis accounting

• All of the choices are correct

The following information is available for Ace Company for 2018: Disbursements for purchases P1,050,000 Increase in trade accounts payable 75,000 Decrease in merchandise inventory 30,000 Costs of goods sold for 2018 was

• P1,155,000

• P1,095,000

• P1,005,000

• P945,000